By Robert Hart, Parliamentary ReporterPARLIAMENT'S PUBLIC Accounts Committee (PAC) yesterday demanded a full report from the Ministry of Finance and Planning on all of Government's unapproved decisions to guarantee loans.
The request from PAC chairman Audley Shaw came after it was disclosed during yesterday's committee meeting that the Factories Corporation of Jamaica (FCJ) had failed to adequately service two government guaranteed loans, at least one unapproved by Parliament, amounting to $450 million.
OUTSIDE OF CONSTITUTIONAL REQUIREMENT
"(The Auditor General) has expressed his concern on an even wider scale where there is the prevalence now of comfort letters, by the Ministry of Finance, which are essentially guarantees that are being done outside the constitutional requirement that the Parliament ought to approve such guarantees," Mr. Shaw said.
According to Auditor General Adrian Strachan's 2003 report, a loan of $225 million was made from the National Health Fund (NHF) to FCJ in 2002 to facilitate financing of two information technology projects.
The Finance Ministry gave an undertaking to repay amounts outstanding on the loan if FCJ was unable to do so from its own resources.
That loan guarantee, however, was not approved by the House of Representatives as required by law.
In his report Mr. Strachan noted that a previous loan, also of $225 million, was made to FCJ in 1999 at an 18 per cent per annum interest rate for a period of 15 years.
At the time of the report Mr. Strachan said the FCJ was already in arrears of $32 million on the 1999 loan.
But yesterday, Alvin McIntosh, Permanent Secretary in the Ministry of Labour and Social Security, admitted that the interest payments now due on the two loans amounts to $121 million.
The social security ministry has portfolio responsibility for the NHF.
Mr. McIntosh also noted that his ministry, along with the Finance Ministry and FCJ, has agreed to consolidate the two loans under a new 20-year repayment scheme with a new eight per cent interest rate.
In addition, $34 million is to be written off the loan and another $50 million enhanced by mortgages against FCJ properties.
Yesterday Mr. Shaw, along with Opposition PAC members Mike Henry and Delroy Chuck, argued that it was unacceptable that the "illegal" guarantee had not passed through the Parliamentary process and that the loans were allowed to run into arrears without earlier action taken.
Robert Martin, Deputy Financial Secretary , promised the committee that he would investigate the matter as well as provide the list of unapproved guarantees, inclusive of deferred financing, for consideration at a specially scheduled PAC meeting on March 22.
The PAC has also requested that the financial secretary or her designate participate in the special meeting.
